S&P Global Ratings says that for global reinsurance, it expects the hard market in short-tail lines will continue throughout 2023.
The global credit rating agency said in a report released last week, “It appears that the hard market is here, particularly in the short tail lines (property and property catastrophe lines). It's not just significant rate increases that were in favour for reinsurers, but also terms and conditions, coverages, and limits. It seems that the global reinsurers have run out of patience after trying to catch up with the increasing loss cost trends over the past several years, resulting in multidecade high rate increases in the property catastrophe market during the January renewals.
At the same time, during the January renewals, cedents' demand was up, but reinsurers were disciplined, focused on exposure management, and have taken a somewhat uniform approach to pricing actions, rather than a regional one as was the case in past years.
S&P maintains its negative view on the global reinsurance sector, but believes the tipping point is coming for a more stable sector view if reinsurers maintain discipline and demonstrate the ability to sustainably earn their cost of capital.
Casualty reinsurance pricing remains firm, benefiting from compounded price increases over the past few years, though rate increases have moderated in the US.
Despite favourable reinsurance pricing, investors remain on the sidelines except for catastrophe bonds.